I'm a multiple-time entrepreneur, living and working in the heart of Silicon Valley for the past quarter century. Currently, I spend most of my time working on a new startup in the online education arena. I've got a BA in political science and an MBA from Stanford. Having been around technology and business on the leading edge, I write mostly about what's new and what's coming for companies and the country. You can find me on Facebook, Twitter and Google+ You can e-mail me at forbes_at_rogodotnet

5 Charts That Show Apple's Plateau After A Meteoric Rise

AppleApple reports its fiscal fourth quarter earnings in two weeks and a strong debut of the new iPhone has the company predicting it will hit the top end of the guidance it offered Wall Street three months ago. But even exceeding that $37 billion target will put Apple more or less flat with where it stood a year ago. For the once high-flyer, which grew revenue 65% between 2010 and 2011, and 45% last year, total growth in the fiscal year that just ended has fallen into the single digits. While Apple remains profitable, it will earn less this year than last. For a look at how it got there, here are five charts that break down the company’s major lines of business.

iPhone Sales By Quarter

The rise of iPhone made Apple the most valuable company on earth, but lately that growth has slowed. Despite calls from many for a significantly less-expensive iPhone to expand market share, Apple took a different path. It introduce two brand new models, the 5s and 5c, the latter of which was only marginally cheaper. Various media reports — and discounts at major U.S. retailers — suggest the 5c hasn’t done much to expand the market for iPhones, but those anecdotes should be taken with a grain of salt. In the meantime, the 5s appears to be a hit.

Still, Apple is so reliant on iPhone sales for revenue, it’s about half the company’s business, iPhone growth needs to resume strongly for the company’s growth to follow. Every quarter in fiscal 2013 has beaten the equivalent one in 2012 for iPhone sales, but seasonality and slower growth are challenges.

Apple Versus The Smartphone Market

Overall, smartphone growth has been breathtaking, nearly doubling during the past two years. While iPhone has remained popular, the total market has practically doubled from 115 million units per quarter to 225 million. Unlike Apple’s start-stop chart — which follows the annual product cycle closely — the aggregate market doesn’t see the periodic declines Apple does. The end result is that the iPhone maker sees its market share vary up towards 20% and down into the low teens on a quarterly basis.

iPad Fueled The Fire, For A While

Apple more or less created the tablet market and has sold more than 125 million iPads in the past 2 years alone. Unfortunately, lower selling prices have limited revenue growth from the tablets to single digits over the past year. With increasing competition from inexpensive products like Amazon’s Kindle Fire and improved offerings from Samsung and GoogleGoogle, as well as some market saturation, it seems unlikely Apple can do much to increase unit sales. In addition, the iPad has a strong seasonal component both around the holiday quarter and new product introductions. Both of those are coming up soon and things like a Retina iPad Mini will likely help turn the graph up a bit. But realistically, iPad grew so big, so fast, that Apple will be challenged to make it much bigger. In a nutshell, that’s the company’s growth problem.

Mac Sales, The Growth Illusion

The decline of the PC industry has created the impression that the Apple is somehow “outgrowing” other companies in computer sales, but the data tells a different story. Mac sales, in fact, are down almost 10% year over year and 27% from the best quarter in the past 2 years to the most recent. Part of that is Apple’s own tablets are the best argument against buying PCs out there. But part of it is that the company’s own computers have become long in the tooth design-wise and it doesn’t compete in several key market segments. A different way of looking at it, however, is that 2 years ago, the Mac segment was 22% of Apple’s business. In the latest quarter, it was 14%, having fallen below 10% last holiday season. Still, 300 million plus PCs are sold every year. There is a growth opportunity here, if Apple can find a way to tackle it.

The Top And Bottom Lines

The numbers are big enough that even single-digit revenue growth means more than $10 billion. But for Apple, gross margins have declined, which not only halted profit growth, it quite literally reversed it. That doesn’t mean the company is any sort of trouble, of course, not with around $150 billion in the bank and more being added each quarter. But to say the company has nearly stopped growing is no exaggeration. And to acknowledge that companies resemble organisms is equally true: If they aren’t growing they are slowly but surely dying. For Apple, the challenge is to find enough of the magic elixir to turn those graphs upward again. Or to draw some new ones.

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Another great article, Mark. You have our permission to short the stock. That is, of course, if you haven’t already done so. I have to say that, I just love seeing you Apple pundits come out with these negative articles, or phone reviews, just prior to a new quarterly earnings release, or just prior to a new product launch. With the upcoming success of their new product releases, 2014 is going to blow your doors off, and you know it. Yet, you come out with these knowingly irresponsible Apple bashes. Assuming that you are being paid by Samsung, or are representing a person, or Company/Hedge Fund, who needs to see the stock first go down before they go long and make a killing. I can’t, and won’t, believe that you are just that naive, but can’t rule that out as a possibility? You are about to be proven massively wrong, and will soon be irrelevant (wait a second, do you first have to be relevant in order to later become irrelevant?). Anyway, before you come back and question me, please short Apple stock and inform your audience of the date, price, etc., with any changes along the way. I believe in putting my money where my mouth is, in lieu of simply writing about it, hoping that it will cause some form of manipulation. Good luck to you!

Michael, you should have stopped with your first sentence. The rest of your post makes you sound like a whiny little kid who gets mad anytime anyone says anything factually negative about your precious Apple. Get over yourself. I swear someone could point out facts and statistics on how smoking is bad for you and people like you would still argue and whine about how the facts are distorted or how an author has an agenda. I guessing your ticked off because you bought a bunch of stock back at 600 and you can’t believe that it’s still below 500 after the iphone launch. Well, maybe that’s because the author has some valid points about the company.

I never short stocks. I never take tips from hedge funds. While both are probably within Forbes rules, they are only acceptable with disclosures.

It would probably shock you I think Apple $800 is far more likely than Apple $300, but it’s nevertheless true. Clearly, I did a poor job of illustrating the point I was trying to make above; or you didn’t give it a fair hearing and deciding to reflexively assume it was an attack on the company.

Apple’s iPhone numbers are always down in the quarter before the release of the new model iPhones. That is not “newsworthy” since it is cyclical.

What would be interesting is to see those charts showing sales AFTER the current quarter in which the new iPhones were released. As in previous years, the numbers do go up dramatically. And with a launch of over 9 million new iPhones sold in the first weekend (compared to about 5 million last year) indications show a greater demand for the new iPhones this year than last.

The previous 4 quarters had a bit under 150 million iPhones sold. I was sort of arbitrarily setting a goal of 200 million for the 4 quarters including the one that just ended. That will take a significant boost due to the 5c as well as continued popularity from the 5s. We’ll certainly see how it plays out.

I know of one real “plateau”, but it is not what is shown in this article.

The iPhone and iPad charts exhibit a very familiar behavior to many who have seen this countless times. The spike around new product introduction through Christmas sales and then the lull into the next product launch.

I do not know if anyone can make generalized claims about those charts as indicators of “plateau”.

As for Mac Sales, it tracks the PC market, so it is unclear if there is negatives here. Q2’12 is 4017, Q2’13 is 3952, a difference of 3% in a total PC slow-down? Especially in the mid to higher end segment? Are we just playing “percentages” or are we looking at meaningful details?

The real “plateau” and “slide” that can happen is if Apple does not do a good job testing its iOS and iPhone before release. With new rumors about iPad, it is even more critical that Apple pays total and complete attention to quality and reliability.

The recent iPhone 5S “BSOD” (Blue Screen of Death) when people use iWork is intolerable, unacceptable and brings back the BAD memories of the Mac.Com fiasco. The one incident during which Jobs made heads rolled. Then there was the Apple Map fiasco, which continues to have lingering problems in slightly more remote locations.

Apple has better NOT modeled itself after Microsoft in its attention to QA. We, as developers and users, will NOT tolerate such lapses and will vote with our dollars. However nice or powerful something is, if it does not work reliably, it is totally USELESS. If our clients shift from iOS to Android, we will follow.

All the charts here are NOT meaningful YET, but if this Blue-Screen-of-Death type problems continue, then the charts will start showing the negative impact.

Jeff, you are clairvoyant, I am a whiny little kid who bought in at $600, but most of it at $705. Or, alternatively, I am up over 400%, but that is of no concern here. If I had stopped after the first sentence it would have been an undeserved compliment, and that was not my intention. The author’s charts are accurate, but statistics can be modified (start dates, end dates, etc.) to support one’s agenda, which was obviously the case here. This article was intentionally published at Apple’s low point, immediately prior to a blow-out upcoming year, to make it appear as though Apple is a dying entity, with no hope for future growth. He is doing a disservice to retail investor’s, like yourself, who rely upon the supposed knowledge of this author, among other’s, for their expertise. My point was to smoke out his real intention. If he truly believes Apple is dying, as outlined in his article, shorting the stock should be a no-brainier, and he should be willing to do such. If he isn’t willing to short it, he would be acting purely contrary to what he is advising others to do, in a round about way. Good luck to you, as well, Jeff.

That’s always a risky venture in the data world, when the next points in the trend will be coming.

Now, I have to take issue with your interpretation of the iPhone and iPad sales charts. First, your case would have been stronger had you presented earlier years, too. Nevertheless, they do show the fluctuations as sales fall prior to the release of a new model–which is exactly where we are today.

If you look closely at both the iPhone and iPad graphs, at the bottom points, you’ll see that they are rising steadily. (Draw a line through those points.) In other words, each trough that comes is *higher* than the one before. The iPhone trough today represents *double* the sales than that in 2011! The iPad trough is up about 2/3.

The peaks are rising, too.

I know that writers often don’t have control over their headlines, but the graphs do *not* show a meteoric rise and then a plateau–either in sales or revenues!

In fact, none of the graphs show a “meteoric” rise, nor a “plateau”. They show great fluctuations, trending up.

I left out the meteoric rise of both iPhone and iPad. They are well documented and I don’t want to diminish them, but I also didn’t want to rehash them.

The point was to do this ahead of this quarter’s earnings, but also to do it ahead of >next< quarter's… We can now see if things change with the new iPhones and new iPads in a much clearer way, using these charts as a baseline.

You approach this as if Apple’s business model is supposed to be low quality, high volume. Apple takes the other route, as Cook just said in a recent interview, Apple goes high quality, low volume, it’s amazing they have such a large market share of desktops considering their business model. You are not comparing Apple to apples

Dave, on the contrary. What I’m suggesting is the only possible ways to grow from here are to (1) go much higher volume, which I’m not advocating or (2) go >somewhat< higher volume by competing in more segments. Apple can't meaningfully grow volumes by staying within its existing segments. Mac is maxed, iPad appears to be as well, and iPhone is now in single-digit growth… Something has to give.

Hi Mark, I am back. Following the stories coming out after the Black Friday weekend, I just wanted to get your thoughts on the comment above: “Mac is maxed, iPad appears to be as well”. Do you still feel that the iPad has been maxed, or are you starting to rethink the article you just wrote? 22% of Target Corporations entire sales volume was made up of Apple products, primarily iPads. If this doesn’t embarrass you for the release timing of your article. you should question your ethics?

I think some Apple supporters are being deliberately dense when it comes to the stock price. There is no doubt Apple produces great products, but the fact is at this size they need to sell 30 million more phones (assuming everything else remains equal) a year to increase the EPS by about 10%. With Mac sales dropping that puts even more pressure on iPhone sales. Will iTunes, iRadio, the mythical iTV (and not the version that has been out for years) or other new i products be able to meaningfully impact sales? We’ll see, but one thing is clear the days of huge growth in revenue and EPS are over simply because the size of the company makes 20+% gain impossible…even 10% becomes challenging when you talk about the numbers involved. With growth in the single digits there is no catalyst to drive the stock price significantly higher.

Moments after reading this article, I had the distinct sensation that my lungs were collapsing and I was running out of air. I began to panic, certain that I was going to suffocate. Then I inhaled and everything was fine again. Whew!